Draghi says "darkest clouds" over Eurozone have subsided

European Central Bank President Mario Draghi suggested the worst of the sovereign debt crisis may be over, saying the “darkest clouds’ over the euro area have receded because of decisive policy steps last year.

“We can begin 2013 on a more confident note, precisely because significant progress was made during 2012,” Draghi said in a speech in Frankfurt today. “The darkest clouds over the euro area subsided. Europe’s leaders recognized that monetary union needs to be complemented by a financial union, a fiscal union, a genuine economic union and eventually a deeper political union.”

Draghi’s comments are the latest to indicate the ECB chief is increasingly confident that the three-year debt crisis has been contained and that the 17-nation currency bloc can emerge from recession later this year. He defended the ECB’s so-far untapped bond-purchase plan, which has calmed fears of a euro break-up on financial markets, saying it is fully in line with the central bank’s price-stability mandate and doesn’t threaten its independence.

“The ECB remains steadfastly committed to its primary mandate of ensuring price stability,” he said. “All of our measures are designed to achieve this goal. And looking at current and expected inflation rates, there is simply no evidence that could substantiate fears about any deviation from price stability.”

The euro was little changed at $1.3315 after Draghi spoke.

Economic Recovery

While the ECB expects the euro-area economy to shrink 0.3% in 2013, Draghi said this month he expects a “gradual recovery” to begin later in the year.

Many countries are making solid progress in bringing their public finances under control and making structural reforms to increase competitiveness, he said today.

“We need patience,” Draghi said. “I am very well aware that for many people in the countries under adjustment, the personal economic situation can be very difficult. But there is simply no alternative to the path of reform.”

Europe is making progress that some commentators had thought impossible only a year ago, he said, citing the Economist magazine’s prediction at the start of 2012 that a United States of Europe was “utterly beyond reach.”

Making the ECB a single European bank supervisor this year is a “major organizational challenge” and “probably the most significant integration step since the Maastricht Treaty,” he said.

In most areas where more integration is needed, “Europe is moving forward or is already there,” Draghi said. “The ambition is not utterly beyond reach.”